American Airlines and Qantas have only a matter of days to respond to the US Department of Transportation’s (DOT) initial rejection of their application for an expanded alliance and anti-trust immunity (ATI) on trans-Pacific routes.
The pair had applied for an extension of time to respond to the DOT’s Show Cause Order of November 18, which argued there was “high risk of competitive harm” should the Qantas and American tie-up be approved, given their combined network would represent 60 per cent of all seats between the US and Australia and the pair would have the largest market share in about 200 city-pair markets.
The DOT said responses to its Show Cause Order had to be received by December 2. However, Qantas and American had asked to have until December 20 to file their response, arguing in their submission “good cause exists for granting this request”.
Further, they said any extension would not prejudice any other party.
“The Department made a number of tentative findings and conclusions in the Show Cause Order, which require specific and detailed responses,” the American and Qantas joint submission said.
“The Joint Applicants need additional time in particular to consider the reasoning and analysis contained in the Show Cause Order, as well as to consider the potential implications of the Department’s tentative findings and conclusions for their respective business interests.”
However, the DOT said on November 25 it found their arguments “unpersuasive”.
“The movants have offered no compelling reason to alter the schedule that we have set, nor do we see any,” the DOT said.
“The facts and legal issues involved have been well developed and argued by the parties to this proceeding, including the applicants.”
Qantas and American have worked closely together on the trans-Pacific market since 2011, albeit without ATI. The pair started codesharing on each other’s flights in 1989 and helped establish the oneworld alliance as founding members.
The other two major alliance groups on the trans-Pacific market were the Delta Air Lines-Virgin Australia tie-up and a JV between United and Air New Zealand.
However, American’s decision to start flights from Los Angeles to Sydney in December 2015 – and Los Angeles to Auckland in June 2016 – prompted the two carriers to seek ATI as part of an expanded joint business agreement and establish a metal-neutral, revenue-sharing joint-venture to reflect the US carrier’s entry into the market with its own aircraft.
In February 2016, the Australian Competition and Consumer Commission (ACCC) authorised the JV for five years, while the New Zealand Ministry of Transport gave its approval in November 2015.
This ACCC decision meant that while Qantas and American were able to align pricing on tickets sold in Australia, the pair was not able to do so on outbound US fares without the green light on the alliance from the DOT.